The market is taking investors on a wild ride this week, and Thursday might have been even more turbulent than Wednesday.

Wednesday was pretty much straight down, but Thursday was all over the place. At one point, the Dow Jones Industrial Average was off by more than 700 points and then clawed back 300 points within a half an hour before sliding again. At one point, the Dow slid under 25,000 and fell to its lowest level since mid-July. The S&P 500 ended down about 2% for the day, and off 6% for the week to date.

Relationships between stock market sectors and outside influencers like Treasury yields seem out of sync. Some of the stocks that took the worst beating on Wednesday, like tech, held in there while some of Wednesday’s better performers, like utilities, got whacked.

Meanwhile, volatility continued to spin higher, though not at the same dizzying rate as the day before. By late in the session, the market’s “fear index,” the VIX, was up 8%, near 25. It was under 12 as recently as Oct. 2.

Easy Does It

All this sends a distinct message to anyone trying to trade these markets: Don’t get trapped. If you’re an experienced trader moving in and out of these bumps and bruises like a skier cruising the moguls, good for you. But for many of us, these are the kind of markets where you don’t want to go all in or all out. Though it admittedly can increase your trading costs, consider trading small if you feel the need to trade at all. That might mean dividing your investment unit into smaller chunks, and not committing too much to any trade at any one time. Moving in partial increments can sometimes help you make better decisions.

At this point, even some of the experts are having trouble getting their arms around all of this volatility, so it’s important for long-term investors not to let themselves get frustrated. The ground is vibrating under the market, and it might be hard to decide what to do next. As noted earlier today, it looks like some sector shakeouts might be under way, and it’s hard to say where things might settle.

Here’s Looking at the Positives

While there’s no clear sign of any major reversal shaping up in the near-term, there were some developments Thursday that at least looked more constructive.

First of all, the info tech sector held together a bit better than on Wednesday, when it looked like a rush for the exits. Both info tech and communication services, the new sector that has some stocks that used to hang out in tech, were among the best performers Thursday. The day before, there seemed to be a theme around selling some of the big tech names like Facebook, Netflix, and Apple that had taken the market up so much into October. On Thursday, however, it wasn’t quite as big a bloodbath. There was less selling of the market-cap heavy big names. Is this something investors can hang their hats on? Some analysts will say it’s just a dead cat bounce, and probably it’s important to see a couple more days of tech coming back before it looks meaningful.

Another development that began late Wednesday and carried into Thursday was a fledgling rally in beaten-down Treasury bonds. One challenge for investors as stocks fell this week was seeing bonds fall as well and not knowing where to put their money. The slight rise in Treasuries, with a corresponding drop in the 10-year yield to 3.14% by late Thursday afternoon, could help ease some minds, potentially.

Also, chances of a fourth Fed rate hike began to slip this week and now stands at 74%, according to Fed funds futures. That’s still pretty high, but down from above 80% a week ago.

As rate hike odds decline and yields slip, it’s a bit odd to see the utilities come under pressure, but that’s what happened Thursday. People had been buying utilities as yields went up, which is opposite of the typical historic pattern. It’s arguably another sign of the topsy-turvy situation on Wall Street right now.

The financials had risen earlier this week with rates, but began losing ground late Wednesday and continued to crater on Thursday. Perhaps it’s another sign of investors feeling like they’ve been burned on financials a number of times this year when rates looked like they might move higher only to reverse themselves.

Bank Earnings Move Into Spotlight Friday

Financials will likely be in focus early Friday as three of the biggest banks report. One thing investors might want to listen for is thoughts from JP Morgan Chairman and CEO Jamie Dimon, who usually speaks during the company’s earnings call. His remarks can sometimes shed light on how he sees the economy shaping up.

Things aren’t shaping up well from a technical standpoint, seemingly. The S&P 500 broke below its 200-day moving average of around 2765 pretty aggressively Thursday. Some analysts had seen that level as one that might bring support, and one that had held pretty well earlier this year. Now we’ll see if the market can find its way back without that particular support point to help prop it up.

A heavy percentage of S&P 500 stocks are now in correction mode, meaning down 10% or more from recent highs. That still isn’t the case for the S&P 500 itself, however. After Thursday’s 2.1% drop, the S&P 500 is down 7% from its late-September all-time high. It would need to fall to around 2650, down from the current 2728, to officially enter a correction for the second time this year.

The same can’t be said for the Nasdaq. It entered correction territory intraday Thursday, down more than 10% from its recent high of approximately 8133. It closed down just over 1% Thursday at 7329.

Amid the stock and Treasury market fluctuations, both oil and the U.S. dollar moved lower Thursday, potentially positive developments for the stock market. Crude is back toward the $70 a barrel level, down from the mid-$70’s earlier this week. The dollar index is back around 95 after briefly moving above 96 a few days ago. The weaker crude market helped drag energy shares Thursday, but might have helped some other companies including airlines.

With bank earnings kicking things off Friday, the market is setting up for perhaps another day of choppy action, so keep the seatbelts fashioned and remember to consider making caution a watchword.

FIGURE 1: VIX Back in Force. The VIX, which measures volatility, rose to a high near 29 on Thursday, a huge swing from lows early this month below 12. This would seem to indicate that many investors expect continued choppiness ahead. Data Source: Cboe. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.thinkorswim

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I've also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van De...